European Session

The standout release during the European session was the UK GDP report. The monthly estimate for June exceeded expectations by a wide margin, driven by a stronger-than-anticipated performance in the services sector. Despite the upside surprise, the data is unlikely to alter the outlook for the Bank of England (BoE), which has signaled a preference for holding interest rates steady unless there is a clear resurgence in inflation. UK growth resilience has been a recurring theme this year, but the BoE's challenge remains balancing above-target inflation pressures in the services sector against signs of broader economic softening.

Looking ahead, the European calendar is light, featuring only a handful of lower-tier releases. These include Spain's final consumer price index (CPI) reading and Eurozone industrial production figures. Neither release is expected to shift the European Central Bank's (ECB) policy stance, and as a result, the market reaction is likely to remain muted. The ECB has been navigating its own disinflation path, with rate decisions increasingly data-dependent as price pressures moderate across the bloc.

American Session

The American session brings the release of the US Producer Price Index (PPI) and weekly Jobless Claims data.

PPI expectations:

• Headline PPI year-over-year (Y/Y): expected at 4.9% versus 5.5% prior
• Headline PPI month-over-month (M/M): expected at 0.2% versus -0.3% prior
• Core PPI Y/Y: expected at 4.1% versus 4.7% prior
• Core PPI M/M: expected at 0.3% versus 0.2% prior

At this stage, the PPI data is expected to be most useful as an input for calculating the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge. Producer-level price trends often feed through to consumer prices with a lag, making PPI a leading indicator that markets scrutinize for early signals on the PCE trajectory. The figures are unlikely to significantly move the probability of a September rate hike, which declined to 35% following the previous day's US CPI report.

Jobless Claims expectations:

• Initial Claims: expected at 202K versus 199K prior
• Continuing Claims: expected at 1794K versus 1801K prior

Given the Federal Reserve's primary focus on inflation, the labor market data is unlikely to be market-moving on its own. Claims have remained near historically low levels for months, consistent with a labor market that has stayed tight even as the Fed's tightening cycle has progressed.

With limited high-impact data on the docket, market participants are largely awaiting a resolution to the US-Iran geopolitical stalemate and the potential reopening of the Strait of Hormuz, a critical chokepoint for global oil shipments through which roughly a fifth of the world's seaborne oil supply transits. Any disruption or normalization there carries direct implications for energy prices and, by extension, global inflation dynamics.

Central Bank Speakers

• 12:15 GMT / 08:15 ET — Fed's Hammack (hawkish, voting member)
• 12:40 GMT / 08:40 ET — Fed's Barkin (neutral, non-voting member)

Comments from both officials will be parsed for any shift in tone regarding the inflation outlook and the path of policy beyond September, particularly in light of the cooling CPI print.

Source: ForexLive